Vermont Health CO-OP Fails State Insurance Standards

Susan L. Donegan, commissioner of the Vermont Department of Financial Regulation, announced today that the Vermont Health CO-OP has failed to meet Vermont’s insurance standards and has been denied a license to sell health insurance in Vermont. The Vermont Health CO-OP (consumer operated and oriented plan) is a non-profit organization funded by loans from the federal government, which submitted an application to be licensed as a mutual member-owned health insurance company.

DFR reviews applications by companies that would like to become insurers. The purpose of the review under state law is to ensure that Vermonters receive insurance from viable companies with the infrastructure and finances to stay in business. A company must have adequate funds to pay claims and debt and its executive management team and board of directors must have adequate financial, insurance and business experience.

Donegan said that after rigorous review and examination of the CO-OP, the department discovered several inadequacies. “The CO-OP has not shown sufficient evidence that it will be able to sustain solvency, repay its federal loans and gain enrollment,” she said.

The CO-OP’s estimated rates are significantly higher than the two other insurance carriers in the exchange market, she said, suggesting that it may not be competitive and it has failed to show how it will achieve the projected number of subscribers.

The department also studied the CO-OP’s policies and procedures and interviewed senior management and the board of directors. It determined that they did not meet the standards of corporate governance for proper oversight and good business judgment necessary to conduct the business of insurance. In addition, there were other instances of conflicts of interest in the awarding of contracts and salaries.

The commissioner said she is aware that this decision will be disappointing to some but remains diligent in her efforts to maintain the gold standard of Vermont’s insurance regulatory process.

“Our regulatory job is to ensure that insurance companies enter the Vermont market as viable companies,” Donegan said, “Solvency is the best consumer protection.”